Nice End-Of-Session Move Higher (Technically Speaking For 2/1)

The ISM Manufacturing Index dipped a bit, but is still at a very healthy 57.6. Let’s take a look at some of the anecdotal comments:

• “We are experiencing massive interruptions to our production due to supplier COVID-19 problems limiting their manufacturing of key raw (materials) like steel cans and chemicals.” [Chemical Products]
• “While there has been some improvement in materials making it to our factories and logistics centers, we are still constrained by (a lack of) qualified labor. Orders so far are not being cancelled, but we are concerned that customers may be losing patience.” [Computer & Electronic Products]
• “Transportation, labor and inflation issues continue to hamper our supply chain and ability to service our customers. Fortunately, it’s also hampering our competition as well. Ultimately, the biggest impact is at the consumer level, as (price increases) continue to get passed through.” [Transportation Equipment]
• Our suppliers are having difficulty meeting scheduled releases as their suppliers experience delays and shortages, so lead times and inventories are struggling, resulting in lost production.” [Food, Beverage & Tobacco Products]

Translation: Supply chain issues are still a big problem (Author has written permission to use the latest report).

The Markit Economics US report was a little more subdued:

The seasonally adjusted IHS Markit US Manufacturing Purchasing Managers’ Index™ (PMI™) posted 55.5 in January, down from 57.7 in December, but higher than the earlier released ‘flash’ estimate of 55.0. The overall upturn was the slowest seen for 15 months and muted in the context of the substantial expansions seen in 2021.

Output rose only fractionally at the start of the year, following substantial increases through most of 2021. Weighing on the upturn was the impact of the Omicron COVID-19 variant, raw material and labor shortages, and a reluctance among some clients to place orders amid hikes in selling prices and longer lead times. The rise in production was the slowest in the current 19-month sequence of expansion.

Still, the overall tenor of the data was good.

Fed governors are now talking about rate hikes:

Federal Reserve Bank of Philadelphia President Patrick Harker favors four 25 basis-point interest-rate increases this year starting next month, but doesn’t back a 50 basis-point move unless there’s an inflation “spike.”

“I would be supportive of a 25 basis-point increase in March. Could we do 50? Yeah. Should we? Well, I’m a little less convinced of that right now,” Harker said Tuesday in an interview on Bloomberg Television. “But we’ll see how the data turn out in the next couple of weeks.”

This was more than telegraphed in the latest dot plot from the Fed.

Let’s turn to today’s charts:

All the indexes had a nice, end-of-the-day rally, ending near session highs.

And, three of the major indexes are now above their respective 200-minute EMAs on the 2-week charts.

The three-month charts are looking better. The SPY and DIA are above their respective 10 and 20-day EMA. The QQQ is above its 200-day EMA. The only drawbacks are that volume is declining during the last few sessions and the size of the bars is decreasing.

Hopefully, something really positive will happen in the next few sessions to provide some fuel to move higher.